System, method and computer program product for administering securities funded by a municipal arbitrage portfolio (MAP)

ABSTRACT

A system, method, and computer program product for implementing municipal arbitrage portfolios are set forth herein. A first investment fund that is compliant with the Investment Company Act of 1940 (the 1940 Act) uses a special purpose trust that: (i) issues at least a First Security funded at least in part by equity of the first investment fund, the First Security providing a series of residual interest payments to the first investment fund; (ii) issues at least one Second Security that results in a series of distributions to a second investment fund; and (iii) owns one or more municipal bonds. The first investment fund may have an obligation to reimburse a liquidity provider (LP) for losses incurred by the liquidity provider from performing its obligation to purchase the Second Security upon tender by a holder. Consolidation of the municipal bonds held by the special purpose trust on the balance sheet of the first investment fund is avoided by using one or more step out transactions.

CROSS-REFERENCE TO RELATED APPLICATION

The present application claims priority to U.S. Provisional ApplicationNo. 60/917,949, filed May 15, 2007, entitled “High Income MunicipalArbitrage Portfolio (HIMAP),” the contents of which are incorporatedherein by reference in their entirety.

FIELD OF THE INVENTION

The present invention is generally related to investment funds, and moreparticularly to investment funds that are compliant with the InvestmentCompany Act of 1940 (the “1940 Act”).

SUMMARY OF THE INVENTION

An exemplary embodiment of the present invention is directed to variousexemplary systems, methods, and/or computer program products forimplementing, managing, and/or administering a Municipal ArbitragePortfolio (MAP) Fund that is compliant with the 1940 Act, wherein theassets of the MAP Fund are managed by at least one fund manager. Theremay be one or more manager(s), which could be fund manager(s) orindependent third party manager(s), according to exemplary embodiments.A Delaware statutory trust, New York common law trust, or similar trust(the “Trust”) is established to hold municipal bonds, the interest onwhich is excludable from gross income for personal federal income taxpurposes. The Trust is established by (i) issuing at least one security(a “First Security”) purchased for cash and (ii) the execution of areimbursement agreement by the MAP Fund. The First Security provides aseries of residual interest payments to the MAP Fund. The Trust alsoissues at least one security (a “Second Security”), which results in aseries of distributions to a second investor, often a tax-exempt moneymarket fund. The Second Security may comprise one or more security(ies)that are entitled to certain future payments of principal, interest andpremium, if any, on underlying municipal bonds, and the right to tenderthe Second Security at the face amount plus accrued interest (the“tender option”), payable from remarketing proceeds or from amountsavailable under a liquidity facility. The Second Security may have apayment priority over the First Security with respect to paymentsreceived on the municipal bonds.

The MAP Fund may have an obligation to reimburse a liquidity provider(LP) for losses incurred from performing the LP's obligation to purchasethe Second Security upon tender by a holder of such Second Security. Theobligation to cover such losses may be created using, or imposedpursuant to, one of four exemplary structures:

-   -   The first structure is a reimbursement agreement between the        liquidity provider and the MAP Fund. The reimbursement agreement        may include provisions that permit the liquidity provider to        cause a sale of the underlying municipal bonds or to cause the        sale of assets held in a Second Trust (the “Second Trust”) which        holds the First Security and other investment securities if        criteria specified in the reimbursement agreement are not met.    -   The second structure is a shortfall swap agreement between the        liquidity provider and the MAP Fund. Pursuant to the shortfall        swap agreement, to the extent that the liquidity provider cannot        recover its losses from a sale of the municipal bonds underlying        the Trust, the MAP Fund would pay an amount to the liquidity        provider equal to the shortfall amount. In some embodiments, a        Second Trust will act as counterparty to the shortfall swap        agreement.    -   The third structure corresponds to one or more tri-party        agreements between the LP, the MAP Fund and a financial        intermediary approved by the LP and the MAP Fund, where the        tri-party agreement includes provisions that permit the        financial intermediary to hold MAP Fund assets for the benefit        of the LP. The LP may enter into a liquidity facility to provide        funds for payment of both the face amount and accrued interest        distributable on the Second Security under certain        circumstances, including the exercise by the holder(s) of the        Second Security of the tender option upon the resetting of the        Second Security's short term floating rate and upon certain        termination events. Any tendered Second Security that is not        remarketed is purchased from funds drawn under the liquidity        facility. In some exemplary embodiments, a Second Trust may act        as counterparty to the tri-party agreement, rather than the MAP        Fund.    -   The fourth structure is a non-recourse obligation of the MAP        Fund.

The MAP Fund may hedge interest rate or other risks inherent in theFirst Security and reimbursement obligations by entering into swapagreements or other derivatives to the extent permitted by the 1940 Actor by investing in one or more of the following instruments: exchangetraded futures, exchange traded options and exchange traded U.S.Treasury obligations.

Consolidation on the balance sheet of the MAP Fund, of the municipalbonds held by the Trust, is avoided by using one or more step outtransactions that ensure(s) that brokers or the Trust, acting oninstructions from a manager of the MAP Fund, or from the MAP Funditself, act only as principals for the benefit of the Trust and not asagents for the MAP Fund manager and/or the MAP Fund.

In some exemplary embodiments, the First Security may be a ResidualTrust Certificate (RTC) and the Second Security may be a short term,Floating Rate (Floater) or Fixed Rate Trust Certificate.

BRIEF DESCRIPTION OF THE DRAWINGS

The foregoing and other features and advantages of the invention will beapparent from the following, more particular description of exemplaryembodiments of the invention, as illustrated in the accompanyingdrawings. In the drawings, like reference numbers generally indicateidentical, functionally similar, and/or structurally similar elements.The drawing in which an element first appears is indicated by theleftmost digits in the corresponding reference number. A preferredexemplary embodiment is discussed below in the detailed description ofthe following drawings:

FIG. 1 depicts an exemplary diagram illustrating an exemplary embodimentof a structure and flow for implementing an exemplary investment fund,in accordance with an exemplary embodiment of the present invention;

FIG. 2 is an exemplary diagram illustrating an exemplary embodiment of aprocess of investing hypothetical investment income from an exemplarymunicipal arbitrage portfolio, in accordance with an exemplaryembodiment of the present invention;

FIG. 3 depicts an exemplary diagram of an exemplary embodiment of acomputer hardware and/or software system, network and plurality ofcomputers and database(s) for managing, calculating net asset value,etc., from time to time in accordance with an exemplary embodiment ofthe present invention;

FIG. 4 depicts an exemplary embodiment of an exemplary computer hardwaresystem platform as may be used in any of various exemplary computersystems according to an exemplary embodiment.

DETAILED DESCRIPTION OF VARIOUS EXEMPLARY EMBODIMENTS

Various exemplary embodiments are discussed in detail below including apreferred embodiment. While specific implementations are discussed, itshould be understood that this is done for illustration purposes only. Aperson skilled in the relevant art can recognize that other components,configurations, accounting data, and ratios may be used without partingfrom the spirit and scope of the invention.

EXEMPLARY DEFINITIONS

The London Interbank Offered Rate (LIBOR)—According to an exemplaryembodiment, LIBOR is a daily reference rate based on the interest ratesat which banks offer to lend unsecured funds to other banks in theLondon wholesale money market (or interbank market). LIBOR may normallybe slightly higher than the London Interbank Bid Rate (LIBID), the rateat which banks are prepared to accept deposits.

Municipal bond arbitrage (also called municipal bond relative valuearbitrage, municipal arbitrage, or just muni arb)—According to anexemplary embodiment, municipal bond arbitrage may generally includebuilding an economically leveraged portfolio of high-quality, tax-exemptmunicipal bonds and simultaneously hedging the duration risk in thatmunicipal bond portfolio by selling short the equivalent taxablecorporate bonds. These corporate equivalents may typically includeinterest rate swaps referencing LIBOR or Securities Industry FinancialMarkets (SIFMA). Muni arb is generally a relative value strategy basedon the fact that interest on municipal bonds is exempt from personalfederal income tax. Because the source of this arbitrage is artificiallyimposed by government tax policy, it has persisted (i.e., it has notbeen “arbitraged away”) for decades. The arbitrage manifests itself inthe form of a relatively cheap longer maturity municipal bond, which maybe, e.g., but is not limited to, a municipal bond that yieldssignificantly more than a corresponding (same maturity, same quality)taxable corporate bond. The steeper slope of the municipal yield curvemay allow participants to collect more after-tax income from themunicipal bond portfolio than is spent on the interest rate swap. As aresult, the carry is greater than the hedge expense. Positive, tax-freecarry can reach into the double digits, according to an exemplaryembodiment. The strategy in municipal bond arbitrage is that, over alonger period of time, two similar instruments—municipal bonds andinterest rate swaps—will correlate with each other. They are both veryhigh quality credits, have the same maturity and are denominated in U.S.dollars. Credit risk and duration risk are largely eliminated in thisstrategy. However, basis risk arises from use of an imperfect hedge,which results in significant, but range-bound principal volatility. Theend goal is to limit this principal volatility, eliminating itsrelevance over time as the high, consistent, tax-free cash flowaccumulates.

Trust or Special purpose trust (SPT)—A SPT is a single purpose legalentity. Its purpose is to issue or sell two classes of securities toinvestors. The SPT purchases municipal bonds and then issues (i)certificates that receive distributions based on a short term floatingrate (generally called “Floaters”) and (ii) Residual Trust Certificates(“RTCs”). The SPT is responsible for accounting for and allocating bothinterest and principal and gain or loss from the underlying bonds to theholders of the two classes of securities. The floaters are paid a shortterm interest rate that is generally reset weekly or monthly. Anyresidual interest available after payment of the floaters and all otherfees associated with the SPT are paid out to the holder of the RTC. TheSPT usually employs a Trustee, a Liquidity agent and a Remarketingagent.

Second Security or Short Term Certificates (“Floaters”)—Floaters areshort term certificates that are usually purchased by 1940 Act Rule 2(a) (7) qualified tax exempt money market funds. The interest rates paidby these certificates are generally reset weekly or monthly. Additionalfeatures of Floaters include that they can be tendered for their faceamount, plus accrued interest plus a portion of the gain share in theunderlying municipal bonds at regular intervals. In addition, the faceamount plus accrued interest of the Floaters is supported by a liquidityprovider.

First Security or Residual Trust Certificates (“RTCs”)—RTCs are one oftwo securities issued and sold by the SPT. The characteristics of RTCsare that they receive any residual interest available from theunderlying bonds after all expenses and senior distributions of the SPTare paid, including interest distributable to the Floaters.Additionally, the holders of the RTCs generally reimburse the liquidityprovider for any losses incurred by the liquidity provider.

An Overview of an Exemplary Embodiment of a Special Purpose Trust(Tender Option Bonds)—Including Exemplary Structure and Flows

FIG. 1 depicts an exemplary diagram 100 illustrating an exemplaryembodiment of a Special Purpose Trust 104 with an exemplary structureand exemplary flows. Diagram 100, according to an exemplary embodiment,illustrates retail investors 101 who may invest cash or otherinvestments in a 1940 Act fund 102. According to an exemplaryembodiment, an investor may invest in a mutual fund instrument using anyof various conventional processes and methods including using a computerhardware and software system to invest funds, to acquire the exemplaryfinancial instruments. According to an exemplary embodiment, the 1940Act fund 102 may notify, using an exemplary computer system, anInvestment Bank (“IB”)/Liquidity Provider (LP)/Remarketing Agent 103that the 1940 Act fund 102 may wish to purchase RTCs 110. The IB/LP 103may create a Special Purpose Trust (“SPT”) 104, which may be bankruptcyremote according to an exemplary embodiment. The SPT 104 may be managedusing a computer hardware/software system 400, not shown, but describedfurther below with reference to FIGS. 3 and 4, according to an exemplaryembodiment. According to an exemplary embodiment, other investors (notshown) may have placed invested assets in a separate tax exempt moneymarket fund (“MMF”) 105. According to an exemplary embodiment, retailinvestors who may invest cash or other investments in MMF 105. Accordingto an exemplary embodiment, an investor may invest cash or otherinvestments in MMF 105 using any of various conventional processes andmethods including using a computer hardware and software system toinvest funds, to acquire the exemplary financial instruments. Accordingto an exemplary embodiment, the IB 103 may contact the tax exempt MMF105, which may indicate a desire of the tax exempt MMF 105 to invest inshort term money market certificates (“Floaters”) 109. According to anexemplary embodiment, the MMF 105 may invest, according to an exemplary,but non-limiting embodiment,

6,000 into the SPT 104. The SPT 104, according to an exemplaryembodiment, may then purchase

6,000 of Municipal Bonds 106. As part of the transaction, the Liquidityprovider (LP) 103 may require the 1940 Act fund 102 to invest additionalcapital into a structure that may meet the financial and legalrequirements of the LP 103 (the reimbursement obligations may bepursuant to e.g., but not limited to, a shortfall swap agreement, areimbursement agreement, and/or a tri-party agreement.) According to anexemplary embodiment, additional capital may be reimbursed by the MAPfund pursuant to obligations to reimburse losses incurred by the LP 103for performing its obligations to purchase the Second Securities upontender by a holder, imposed pursuant to obligations under any of severalexemplary security agreements. According to an exemplary embodiment, theadditional capital reimbursement obligations may be imposed pursuant toobligations of, e.g., but not limited to, a shortfall swap agreement, areimbursement agreement, or a tri-party agreement. The additionalinvestment of capital into the structure may be accomplished, accordingto an exemplary embodiment, by the 1940 Act fund 102 purchasingadditional municipal bonds 108 which may be placed in a Second Trust107. According to an exemplary embodiment, the SPT 104 may then issuetwo forms of securities, the Floaters 109 and Residual TrustCertificates (“RTCs”) 110, according to an exemplary embodiment.According to an exemplary embodiment, the Floaters 109 may be issued tothe MMF 105, and the RTCs 110 may be issued to the 1940 Act fund 102.According to an exemplary embodiment, the RTCs 110 may be deposited intothe Second Trust 107 for the benefit of the 1940 Act Fund 102. Accordingto an exemplary embodiment of the invention, the 1940 Act Fund 102 mayenter into any of several security agreements 112 with the LP 103 using,e.g., but not limited to, a shortfall swap agreement, a reimbursementagreement, and/or a tri-party agreement.

Exemplary Embodiment of an Exemplary Hypothetical Investment—ExemplaryMunicipal MAP Income

FIG. 2 depicts a diagram 200 illustrating an exemplary embodiment of anexemplary hypothetical investment generating exemplary municipalarbitrage portfolio (MAP) income, according to an exemplary embodiment.The Municipal Bonds 201 may pay interest and principal into the SpecialPurpose Trust 202, according to an exemplary embodiment. The SPT 202 maythen pay interest to the MMF 203 according to an exemplary embodiment.According to an exemplary embodiment, fees may be charged to the SPT 202and/or the RTC holder, according to an exemplary embodiment. TheTrustee, Liquidity Provider, and Investment Bank, Remarketing agent 204may charge a fee, according to an exemplary embodiment. Any interestincome and principal, after paying all fees and expenses may be paid,according to an exemplary embodiment, to the holders of the Floaters 109(MMF 105, 203) and the holder of the RTC 206, (the 1940 Act Fund 207,102), which may have deposited the RTC 206 in a Second Trust 205, in oneexemplary embodiment. The 1940 Act Fund 207 may hedge the 1940 ActFund's interest rate risk and may purchase various hedging instruments208 which may also be deposited in the Second Trust 205, according to anexemplary embodiment. The municipal bonds 209 that the 1940 Act fund 207has purchased may also be deposited in the Second Trust 205, accordingto an exemplary embodiment. According to an exemplary embodiment, all ofthe assets deposited in the Second Trust 205 for the benefit of the 1940Act fund 207 may be subject to legal agreements between the Liquidityprovider (LP) 204 and the 1940 Act fund 207.

A Detailed Description of Various Exemplary Embodiments

Various aspects and exemplary embodiments of the invention are discussedherein and may be implemented using, e.g., but not limited to, theTrust, a First Security issued by the Trust, a Second Security issued bythe Trust, a reimbursement agreement, a shortfall swap agreement, atri-party agreement, a Second Trust and/or a non-recourse obligation ofthe MAP Fund. Examples of instruments for establishing such structures,securities and agreements are set forth in Appendices I-VII. It will beunderstood that the Appendices are exemplary, and not intended to limitthe scope of the invention.

Referring to FIG. 1, according to an exemplary embodiment, there isshown an overview of an exemplary structure for implementing a MAP Fundthat is compliant with the 1940 Act. Initially, investors 101 maycontribute assets (e.g.,

1,000) to the MAP Fund 102, according to an exemplary embodiment. Theseassets may be managed by at least one fund manager, according to anexemplary embodiment. The Trust 104 may issue a First Security (e.g.,Residual Trust Certificates (RTCs) 110) that may be funded by thecontribution of cash from the MAP Fund 102 to the Trust 104 plusexecution of a reimbursement agreement, according to one exemplaryembodiment. The First Security(ies) 110 may provide a series ofdistributions or residual interest payments to the MAP Fund 102,according to an exemplary embodiment. The First Securities (e.g., theRTCs 110) may provide sufficient capital to meet the obligations imposedby the security agreements 112 (such as, e.g., but not limited to, thereimbursement agreement, or the shortfall swap agreement, etc.).

According to an exemplary embodiment, the Trust 104 may also issue atleast one Second Security 109 (e.g., a short term floating rate or fixedrate trust certificate) that may be funded by the contribution of cashfrom a tax exempt money market fund (MMF) 105, that may result in aseries of interest payments to the holder of the Second Security, theMMF 105, according to an exemplary embodiment. The Trust 104 may own oneor more municipal bonds 106, according to an exemplary embodiment. Themunicipal bond portfolio may be purchased using monies supplied by theMMF 105, according to an exemplary embodiment. The Second Security 109may have a payment priority over the First Security 110 with respect toincome generated by the portfolio of municipal bonds 106.

The MAP Fund 102, according to an exemplary embodiment, may have anobligation (see security agreement(s) 112) running in favor of aliquidity provider (LP) 103 to reimburse losses of the liquidityprovider 103. The obligation to cover such losses may be imposed bysecurity agreements 112, using, e.g., but not limited to, one of fourexemplary, but non-limiting structures.

The first structure, according to an exemplary embodiment, may include areimbursement agreement (an example of which is documented in AppendixIV) between the liquidity provider 103 and the MAP Fund 102. In anexemplary embodiment, the MAP Fund 102 creates a Second Trust 107 to ownthe First Security 110 and to enter into the reimbursement agreement. ASecond Trust 107 may be used in various exemplary embodiments of theinvention. The MAP Fund 102 may purchase additional securities 108(normally municipal bonds) that may be deposited into the Second Trust107 which will satisfy the provisions of the reimbursement agreement.

The second structure, according to another exemplary embodiment, mayinclude a shortfall swap agreement (an example of which is documented inAppendix V) between the liquidity provider 103 and the MAP Fund 102. Tothe extent that the liquidity provider 103 cannot recover its lossesfrom a sale of the municipal bonds underlying the Trust 104 that issuedthe First Security 110 and Second Security 109, pursuant to theshortfall swap agreement, the MAP Fund 102 may pay an amount to theliquidity provider 103 equal to the shortfall. In some embodiments, theSecond Trust 107 may act as counterparty to the shortfall swapagreement.

The third structure, according to an exemplary embodiment, may include atri-party agreement (an example of which is documented in Appendix VI)between the liquidity provider 103, the MAP Fund 102, and a financialintermediary or like entity (not shown) approved by the liquidityprovider 103 and the MAP Fund 102. The tri-party agreement may includeprovisions that permit the financial intermediary to hold MAP Fund 102assets for the benefit of the liquidity provider 103 to cover defaultsunder the tri-party agreement.

The fourth structure, according to an exemplary embodiment, is anon-recourse obligation (an example of which is documented in AppendixVII) of the MAP Fund 102.

As illustrated in the exemplary embodiment depicted in FIG. 2, the MAPFund 102, 207 may hedge, e.g., but not limited to, interest rate 208 andother risks inherent in the First Security 110, 206 or reimbursementobligation by using, e.g., but not limited to, exchange traded futures,options and U.S. Treasury obligations for hedging purposes in order toavoid the 1940 Act Rule 12d3-1 prohibition discussed herein. Swapagreements may also be used to the extent permitted under the 1940 Act.

Consolidation of the municipal bonds issued by the Trust 104, 202 on abalance sheet of the MAP Fund 102, 207 may be avoided by using one ormore step out transactions that ensure(s) that brokers or the Trust 104,acting on instructions from a manager or the MAP Fund 102, 207, act onlyas principals and not as agents for the manager or the MAP Fund 102,207. The MAP Fund 102, 207 may use tender option bonds (“TOBs”) (i.e.,investment trusts (such as the Trust 104 described above) that allocatemunicipal bond income among different classes of securities) asinvestment vehicles in the 1940 Act environment (e.g., but not limitedto, closed end fund, mutual fund, exchange traded fund (ETF). In someexemplary embodiments:

-   -   the MAP Fund 102, 207 may be implemented as an individual or        sub-advised third party single or multiple manager        muni-arbitrage vehicle utilizing managers that specialize in        purchasing securities issued by TOB investment programs;    -   TOB program(s) may be used as the core investment strategy of        the MAP Fund 102, 207 (e.g., investments in the Residual Trust        Certificates 110, 206 from the TOB programs may constitute,        e.g., but not limited to, 5-100% of the holdings of the MAP Fund        102, 207). In some embodiments, the Residual Trust Certificates        110, 206 may constitute a majority of the portfolio.

Some exemplary embodiments of the present invention may execute a TOBprogram on a recourse basis (e.g., the liquidity provider 103, 204 mayhave recourse to the MAP Fund 102, 207 to cover all losses) with aslight variation from the market standard recourse trade in that therecognition of capital contributed may be reflected in a Second Trust107, 205, and may include a reimbursement agreement. Alternatively, theTOB program may be executed on a non-recourse basis. The vehicles andmethodologies, according to an exemplary embodiment, eliminate thecollateral issue in a 1940 Act fund, because there is no violation ofthe prohibition against posting of collateral for purposes other thanthe purchase of exchange traded futures, as set forth in Rule 17(f)under the 1940 Act. According to another exemplary embodiment, tri-partyagreements may also be used, which may allow securities subject toSecurities Agreements 112 to remain with the custodian of the MAP Fund102, 207 (e.g., the entity responsible for holding the assets of the1940 Act fund). The tri-party agreements may be between the liquidityprovider 103, 204 and the MAP Fund 102, 207 or Second Trust 107, 205.The tri-party agreement may include, in one exemplary embodiment,agreed-upon terms by which securities owned by the MAP fund for thebenefit of the MAP Fund may be subject to provisions of one or more ofthe shortfall swap agreement or the reimbursement agreement, which couldbe used to reimburse the liquidity provider 103, 204, for lossesincurred from performing the LP's obligations to purchase the SecondSecurities upon tender by a holder, which could be used to pay amountsowed to the liquidity provider 103, 204. In essence, the third party mayact as an independent entity that may enforce the terms in the shortfallswap agreement or reimbursement agreement between the MAP Fund 102, 207and the liquidity provider 103, 204, according to an exemplaryembodiment. It is believed that a recognized independent “1940 Actqualified” party (institutions approved by the SEC to qualify this role)permits the assets to remain with the MAP Fund 102, 207 but to besubject to the terms and conditions that the MAP Fund 102, 207 may enterinto with the LP 103, 204, imposed by the security agreements 112 (e.g.,the shortfall swap agreement, or the Reimbursement Agreement, etc.).

As shown in the exemplary embodiment of FIG. 2, hedging interest raterisk, among other risks, is an important component of managing thefinancial risks of owning the First Security 110, 206 and executing areimbursement agreement, shortfall swap agreement or tri-partyagreement. According to an exemplary embodiment, LIBOR or SecuritiesIndustry Financial Markets Association (SIFMA, formerly the Bond MarketAssociation (BMA)) swaps may be used for hedging purposes. According toan exemplary embodiment, swap agreements may have a value at cost ofmore than 5% of a typical fund's underlying value. Under the 1940 Act,this is prohibited due to “securities-related business” or “issuer”limits. A securities related business is defined as “any person that, inits most recent fiscal year, derived 15 percent or more of its grossrevenues from securities related activities.” There is a prohibitionunder Rule 12d3-1 under the 1940 Act regarding ownership limits:“Immediately after any such acquisition (of securities), the acquiringcompany has invested not more than five percent of the value of itstotal assets in the securities of the issuer.” Swap agreements areissued by a securities related business. Therefore, the MAP Fund 102,207 may, e.g., use exchange traded futures, options and U.S. Treasuryobligations for hedging purposes in order to avoid the Rule 12d3-1prohibition. Swap agreements may also be used to the extent permittedunder the 1940 Act.

To avoid FASB 140 consolidation issues on transfer (purchase) ofsecurities, the brokers or the Trust 104, 202 may act only as principalsand not as agents for the MAP Fund 102, 207. This is necessary to complywith the 1940 Act limitations on leverage, and may require the use ofone or more step out transactions, in an exemplary embodiment. Step outtransactions are procedures to ensure that the transfer of the municipalbonds from a seller into the TOB program are done so that the underlyingmunicipal bonds held by the Trust are not consolidated onto the balancesheet of the MAP Fund 102, 207 as if the MAP Fund 102, 207 had acted asprincipal.

There is a specific exception (FASB 46 as it relates to SEC RegulationS-X, Rule 6-03(c)(1) accounting for their investments in accordance withthe specialized accounting guidance in the AICPA Audit and AccountingGuide, Audits of Investment Companies; paragraph 4(e) of thisInterpretation states that “an enterprise subject to SEC Regulation S-X,Rule 6-03(c)(1) shall not consolidate any entity that is not alsosubject to that same rule”) that does not require Registered InvestmentCompanies to consolidate variable interest entities (such as, e.g., aTOB program) unless the Trust was also a Registered Investment Company.In an exemplary embodiment of the invention, the MAP Fund 102, 207 isable to fall within this exception because the MAP Fund 102, 207 is aRegistered Investment Company and the Trust 104, 202 is not, and is notrequired to be, registered as an investment company. As a result, noconsolidation occurs between the MAP Fund 102, 207 and the Trust 104,202 or the Trust's underlying securities.

Basic Structure of TOB and Manager's Role in Hedging

Depending upon whether the MAP Fund 102, 207 uses a single manager or amulti-manager strategy, there could be one or more separate accountsconstituting the corpus of the MAP Fund 102, 207. The separate accountsare for the benefit of the MAP Fund 102, 207, and serve to meet thediversification test as established by the 1940 Act by using individualaccounts and securities rather than a number of managers.

In one exemplary embodiment, the MAP Fund 102, 207 manager(s) may workwith a TOB sponsor to agree on a specific bond issue for inclusion in anew tender option bond. A new Trust may be created to buy the municipalbonds. The Trust may be capitalized with two different classes ofsecurities. In some exemplary embodiments, the Second Security(ies) 109may be referred to as the Floaters 109 and the First Security(ies) 110may be referred to as Residual Trust Certificates 110, 206. The Floaters109 may be structured to be purchased by tax exempt money market funds105, 203 relying on Rule 2a-7 under the 1940 Act because there is aconditional liquidity facility available to the holders of the SecondSecurity(ies) 109.

Recourse Tender Option Bonds (TOB) Exemplary Embodiments

In exemplary embodiments employing a recourse structure, the MAP Fund102, 207 may purchase Residual Trust Certificates 110, 206 at a valuethat is the difference between the funds contributed by the holders ofthe short term floaters 109 and the value of the underlying municipalbonds 106, according to an exemplary embodiment. Additionally, the MAPFund 102, 207, in an exemplary embodiment, may have entered into areimbursement agreement with the liquidity provider 103, 204. In oneexemplary embodiment, this reimbursement agreement may require themanager to meet mark-to-market losses of the underlying bond portfolioin, e.g., two ways: 1) the MAP Fund 102, 207 may buy short term Floaters109 to reduce leverage in the Trust 104, 202 or pledge additionalmunicipal bonds to the liquidity provider 103, 204, or 2) the liquidityprovider 103, 204 may sell the underlying bonds 106 and that particularTrust 104, 202 may be terminated. These different types of securityagreements 112 cover the conditions upon which the MAP Fund 102, 207would normally have created a collateral account with the liquidityprovider.

Hybrid of Non-Recourse/Recourse Embodiments

The non-recourse program leverage may be lower than that of the recoursemodel, which may result in lower potential returns on the Residual TrustCertificates 110, 206. As a further alternative, a reimbursementagreement that would not result in the need for collateral may be used;however, it may result in investing additional capital into the SecondTrust 107, 205 by purchasing additional approved securities or floaters(in either case additional securities would be placed into a SecondTrust 107, 205) to ensure that the liquidity provider 103, 204 iswilling to continue the TOB program as opposed to liquidating it.

The economics of a TOB 104 allow for the purchase of municipal bonds106, 201 using funds from short term money market funds 105, 203 andother market participants which provide capital at a lower cost than theinterest paid on long term municipal bonds. This may be due to thephenomenon of the steepness of the municipal bond yield-curve. The netinterest spread is paid to the holders of the Residual TrustCertificates. The TOB sponsor is usually an investment bank (such as,e.g., J.P. Morgan, etc.) that, either directly or through an affiliate,may act as a liquidity provider/remarketing agent. The LiquidityProvider may receive a fee for this service. A trustee may receive a feefor administering the trust. The fees may be paid directly by the Trust104, 202 and not by the holders of the Residual Trust Certificates 110,206, according to an exemplary embodiment.

If the ratio of taxable interest rates to tax exempt interest rateschanges, the market value of the underlying municipal bond portfolio maydecrease, which may result in the 1940 Act MAP Fund 102 needingadditional capital in the recourse model. This risk may be mitigated bythe manager entering into interest rate hedges. According to oneexemplary embodiment, this can be accomplished with LIBOR swapagreements; however, there is a Rule 12d3-1 limitation issue; hence themanagers may use Treasuries, futures or other exchange traded optioninstruments which are permitted under the 1940 Act. If the underlyingbonds in the Trust are experiencing market value deterioration, thehedge may provide positive contribution to the MAP Fund.

Non-Recourse TOB Embodiments

In some embodiments, a non-recourse TOB is used wherein the buyer of theResidual Trust Certificates 110 may purchase the securities (i.e., RTCs110) subject to meeting terms and conditions required by the liquidityprovider 103. Typical leverage inherent in the trade on a non-recoursebasis is anywhere from 4x to 9x . In these embodiments, there is noreimbursement agreement, and hence there are lower levels of leverage asthe liquidity provider to the transaction has no recourse to themanager.

Summary of the Trade

In some exemplary embodiments, the manager of the MAP Fund may choosethe municipal issuer and the exact bonds utilized in a particular Trust.The manager may work with a TOB sponsor to determine whether the programwill be accomplished on a recourse or non-recourse basis which, in part,may determine the amount of economic leverage in the TOB program. Theamount of leverage may determine the mix of Second and First Securities(e.g., floaters and residual trust certificates, respectively) in theTrust, according to an exemplary embodiment. In an exemplary embodiment,the TOB sponsor may raise funds from the sale of the floaters to taxexempt money market funds and other market participants and the sale ofthe Residual Trust Certificates to the MAP Fund (or Second Trust). Theunderlying municipal bonds may be held by the Trust and may pay outprincipal and interest in accordance with the terms of the Securitiesissued, according to an exemplary embodiment. Remarketing/liquidityagent and trustee fees may be paid by the Trust or the MAP Fund, and, ifany excess remains, it may be paid to the Residual Trust Certificates.The manager of the MAP Fund may buy one or more Residual TrustCertificates from different TOB sponsors, aggregate the exposure, andmay hedge market interest rate risk between the floating rates of theSecond Security(ies) and the underlying bond portfolio, according to oneexemplary embodiment.

The manager of the MAP Fund may hedge the interest rates, according toone exemplary embodiment. To insure compliance with provisions of 1940Act Rule 12d3-1 pertaining to the use of swap agreements, MAP Fundmanagers may use, e.g., but not limited to, exchange traded futures,options or Treasuries for hedging, according to an exemplary embodiment.The MAP Fund 102 may hold several assets, including, e.g., but notlimited to, Residual Trust Certificates, Treasuries, futures and otherhedging instruments, cash and a Second Trust, according to an exemplaryembodiment.

The income and gains or losses to the MAP Fund 102, according to anexemplary embodiment, may be generated from: 1) municipal bond interestdistributed via the Residual Trust Certificates, 2) gains from the saleof the underlying bonds and losses from amounts paid to the liquidityprovider (e.g., in accordance with the security agreements 112), and 3)hedging gains or losses from futures, options and other hedginginstruments, and gains, losses and income associated with othersecurities held in the Second Trust, according to an exemplaryembodiment.

In some exemplary embodiments, the managers' fees in the MAP Fund (a1940 Act compliant structure) may be divided into several categories,including e.g., but not limited to, a base management fee and a fulcrumfee based upon that specific manager's performance.

Residual Trust Certificate Valuation

In some exemplary embodiments, a transparent methodology may be providedfor valuing Residual Trust Certificates, which generally do not yettrade in an active market. Lack of trading does not mean that theycannot be valued. As to valuation, the administrator of the MAP Fund mayapply the following exemplary methodology, according to an exemplaryembodiment:

a) The daily market value (from a third party pricing service) of themunicipal bond or bonds underlying a Trust, less the current fundingamount of short term floaters, according to an exemplary embodiment, and

b) The amount of interest distributable to the Residual TrustCertificate from the underlying bond/bonds after deducting the shortterm floaters' accrued interest (gain share, if any) as well as alltrustee, liquidity and remarketing fees, according to an exemplaryembodiment.

Collateral Vs. Pledging Issue

Each TOB may be structured in such a way as to insure that it is incompliance with the 1940 Act whereby MAP Fund 102 assets are used to buythe Residual Trust Certificate 110, instead of posting collateral,according to an exemplary embodiment. Thus, each TOB special purposetrust can be constructed without having to pledge collateral, accordingto an exemplary embodiment. In particular, in one embodiment, thepurchased Residual Trust Certificate may contain sufficient embeddedequity for the liquidity provider. For example, managers may enter intoeither non-recourse TOB structures with no generic reimbursementagreement or shortfall swap agreements, or may have the option ofentering into 1940 Act compliant reimbursement agreements, according toexemplary embodiments. The options, according to an exemplaryembodiment, have advantages and disadvantages which impose certainconstraints on the manager's investment flexibility. The third option isthe creation of tri-party agreements which are 1940 Act compliant.

Consolidation (Under FAS 140)

If the TOB special purpose trust is improperly constructed, there may bea FAS 140 consolidation issue. That is, the MAP Fund would need to bookthe value of the Residual Trust Certificates and the gross value of theunderlying municipal bonds as an asset as well as the value of theFloaters as a liability which would create balance sheet leverage forthe MAP Fund. In some exemplary embodiments, in order to ensure that thepurchase of Residual Trust Certificates by the MAP Fund will not resultin the need to recognize the gross value and floater liability, the MAPmanager(s) may be prohibited from deviating from the approved TOBcreation policies, use of approved TOB sponsors, and/or deviating fromapproved step out transactions. One example of an aspect of such apolicy may be that the TOB Sponsor has to be a principal as opposed toan agent in the establishment of the TOB program. Other policies arepossible, provided that they are consistent with the step outmethodology discussed above.

An Exemplary Computer Methodology of Managing RTCs

To purchase and value RTCs an exemplary embodiment of the invention mayuse computer technology such as, e.g., but not limited to, computerhardware, processors, software, storage devices, communicationstechnology, database management tools, a database, financial software,and/or data transmission, according to an exemplary embodiment.

FIG. 3 depicts an exemplary diagram 300 illustrating an exemplary dataprocessing system which may include, according to an exemplaryembodiment, portfolio data collection software 310 which may receive,e.g., but not limited to, prime broker report data 302, market pricedata 306, which may be provided directly, or according to an exemplaryembodiment, may be provided via a third party pricing service 304, andmay receive a trade blotter. The portfolio data collection software 310,according to an exemplary embodiment, may be stored in a MAPadministration database 312. MAP administration database 312 may providedata to portfolio valuation software 314, according to an exemplaryembodiment. The portfolio valuation software 314, may provide any of anumber of exemplary reports. According to an exemplary embodiment,portfolio valuation software 314, may provide 40 Act reports 316, 40 Actaccounting reports 318, 40 act journal entries 320, and/or 40 ActTrustee reconciliation reports 322, according to an exemplaryembodiment.

Using portfolio data collection front end software (and/or hardware)(“PDCFES”) 310, according to an exemplary embodiment, may electronicallycollect data, e.g., but not limited to, daily, or otherwise, fromvarious prime brokers 302 regarding current bond holdings, according toan exemplary embodiment. Market price data 306, according to anexemplary embodiment, may be transmitted electronically to, e.g., butnot limited to, third party pricing services 304 and prices may beindependently confirmed and may be transmitted electronically daily.Further, all current trading activity may also be transmittedelectronically to the portfolio data collection software 310, accordingto an exemplary embodiment.

MAP Administration Database 312, according to an exemplary embodiment,may be used to collect, store and manage data collected from primebrokers 302, third party pricing services 304, and new trades 308, andmay then be processed using the PDCFES 310, according to an exemplaryembodiment, and may be transferred into the MAP Fund administrationdatabase 312, according to an exemplary embodiment, where the data maybe compiled so that that the data can be electronically, using anexemplary computer system for example, reconfigured to provide the dataneeded to value both the RTCs 110, 206 and municipal bonds 106, 108,201, 209 and any other securities 109, etc., owned and/or held by theMAP Fund 102, 207.

Portfolio Valuation and Report Software (“PVRS”) 314, according to anexemplary embodiment, may then compute data, according to an exemplaryembodiment, using the PVRS 314 to determine, e.g., but not limited to,daily (or other periodic, or a periodic, etc.) values of the RTCs 110,206 and other related securities 106, 108, 201, 209, 109, etc., basedupon, e.g., but not limited to, established pricing methodologies. ThePVRS 314 may then, according to an exemplary embodiment, generatereports 316-322 that may be used for, e.g., but not limited to, dailyvaluation 316, accounting 318, journal entry 320 and/or trusteereconciliation 322, etc., purposes, according to an exemplaryembodiment.

According to an exemplary embodiment, a computer hardware and/orsoftware system 300 (not shown), 400, such as, e.g., but not limited to,FIG. 4, may be used to implement exemplary embodiments and may be usedto perform among other functions, such as, e.g., but not limited to,calculations and computations including, e.g., but not limited to:

-   -   Daily portfolio monitoring and analysis;    -   Integration of multiple data sources into customized single        reports;    -   Interfacing with multiple prime brokers;    -   Compliance Monitoring;    -   Compliance Reporting;    -   Compliance Oversight;    -   Calculating/computing Daily net asset value (NAV);    -   Performance reporting details; and/or    -   Margin to equity reporting.

FIG. 4 depicts an exemplary computer system that may be used inimplementing an exemplary embodiment of the present invention.Specifically, FIG. 4 depicts an exemplary embodiment of a computersystem 400 that may be used in computing devices such as, e.g., but notlimited to, a client and/or a server, etc., according to an exemplaryembodiment of the present invention. FIG. 4 depicts an exemplaryembodiment of a computer system that may be used as client device 400,or a server device 400, etc. The present invention (or any part(s) orfunction(s) thereof) may be implemented using hardware, software,firmware, or a combination thereof and may be implemented in one or morecomputer systems or other processing systems. In fact, in one exemplaryembodiment, the invention may be directed toward one or more computersystems capable of carrying out the functionality described herein. Anexample of a computer system 400 may be shown in FIG. 4, depicting anexemplary embodiment of a block diagram of an exemplary computer systemuseful for implementing the present invention. Specifically, FIG. 4illustrates an example computer 400, which in an exemplary embodimentmay be, e.g., (but not limited to) a personal computer (PC) systemrunning an operating system such as, e.g., (but not limited to)MICROSOFT® WINDOWS® NT/98/2000/XP/CE/ME/VISTA, etc. available fromMICROSOFT® Corporation of Redmond, Wash., U.S.A. However, the inventionmay not be limited to these platforms. Instead, the invention may beimplemented on any appropriate computer system running any appropriateoperating system. In one exemplary embodiment, the present invention maybe implemented on a computer system operating as discussed herein. Anexemplary computer system, computer 400 may be shown in FIG. 4. Othercomponents of the invention, such as, e.g., (but not limited to) acomputing device, a communications device, mobile phone, a telephonydevice, a telephone, a personal digital assistant (PDA), a personalcomputer (PC), a handheld PC, an interactive television (iTV), a digitalvideo recorder (DVD), client workstations, thin clients, fat clients,proxy servers, network communication servers, remote access devices,client computers, server computers, routers, web servers, data, media,audio, video, telephony or streaming technology servers, etc., may alsobe implemented using a computer such as that shown in FIG. 4. Servicesmay be provided on demand using, e.g., but not limited to, aninteractive television (iTV), a video on demand system (VOD), and via adigital video recorder (DVR), or other on demand viewing system.

The computer system 400 may include one or more processors, such as,e.g., but not limited to, processor(s) 404. The processor(s) 404 may beconnected to a communication infrastructure 406 (e.g., but not limitedto, a communications bus, cross-over bar, or network, etc.). Variousexemplary software embodiments may be described in terms of thisexemplary computer system 400. After reading this description, it maybecome apparent to a person skilled in the relevant art(s) how toimplement the invention using other computer systems and/orarchitectures.

The computer system 400 may also include, e.g., but may not be limitedto, one or more input devices 416, such as, e.g., but not limited to, akeyboard, mouse, touchscreen, stylus, a sensor, a gesture recognitiondevice, a voice recognition device, a datastream, a datasource, and/or adata capture device, etc.

Computer system 400 may include one or more output devices 432, e.g.,but not limited to, a display interface 402 that may forward, e.g., butnot limited to, graphics, text, and other data, etc., from thecommunication infrastructure 406 (or, from a frame buffer, etc., notshown) for display on the display unit 430.

The computer system 400 may also include, e.g., but may not be limitedto, one or more output devices 432, such as, e.g., but not limited to, amonitor, a display 430, a screen, touch screen, a television, a cathoderay tube (CRT), a liquid crystal display (LCD), a plasma panel, aprinter, and/or any other output device 432, etc.

The computer system 400 may also include, e.g., but may not be limitedto, a main memory 408, random access memory (RAM), and a secondarymemory 410, etc. The secondary memory 410 may include, for example, (butnot limited to) a hard disk drive 412 and/or a removable storage drive414, representing a floppy diskette drive, a magnetic tape drive, anoptical disk drive, a compact disk drive CD-ROM, a flash memory device,a storage device, etc. The removable storage device 414 may, e.g., butnot limited to, read from and/or write to a removable storage unit 418in any of various well known manners. Removable storage unit 418, alsocalled a program storage device or a computer program product, mayrepresent, e.g., but not limited to, a floppy disk, magnetic tape,optical disk, compact disk, etc. which may be read from and written toby removable storage drive 414. As may be appreciated, the removablestorage unit 418 may include a computer usable storage medium havingstored therein computer software and/or data. In some embodiments, a“machine-accessible medium” may refer to any storage device used forstoring data accessible by a computer. Examples of a machine-accessiblemedium may include, e.g., but not limited to: a magnetic hard disk; afloppy disk; an optical disk, like a compact disk read-only memory(CD-ROM) or a digital versatile disk (DVD); a magnetic tape; a flashmemory device; a storage device; and/or a memory chip, etc.

In alternative exemplary embodiments, secondary memory 410 may includeother similar devices for allowing computer programs or otherinstructions to be loaded into computer system 400. Such devices mayinclude, for example, a removable storage unit 422 and an interface 420.Examples of such may include a program cartridge and cartridge interface(such as, e.g., but not limited to, those found in video game devices),a removable memory chip (such as, e.g., but not limited to, an erasableprogrammable read only memory (EPROM), or programmable read only memory(PROM) and associated socket, and other removable storage units 422 andinterfaces 420, which may allow software and data to be transferred fromthe removable storage unit 422 to computer system 400.

Computer 400 may also include an input device 416 such as, e.g., (butnot limited to) a mouse or other pointing device such as a digitizer,and a keyboard or other data entry device (not shown).

Computer 400 may also include output devices, such as, e.g., (but notlimited to) display 430, and display interface 402. Computer 400 mayinclude input/output (I/O) devices such as, e.g., (but not limited to)communications interface 424, cable 428 and communications path 426,etc. These devices may include, e.g., but not limited to, a networkinterface card, and modems (neither are labeled). Communicationsinterface 424 may allow software and data to be transferred betweencomputer system 400 and external devices. Communications path 426 may becoupled to one or more other computer devices 400 via one or morenetworks 432, as will be apparent to those skilled in the relevant art.

In this document, the terms “computer program medium” and “computerreadable medium” may be used to generally refer to media such as, e.g.,but not limited to removable storage drive 414, a hard disk installed inhard disk drive 412, and signals 428, etc. These computer programproducts may provide software to computer system 400. The invention maybe directed to such computer program products.

References to “one embodiment,” “an embodiment,” “example embodiment,”“various embodiments,” etc., may indicate that the embodiment(s) of theinvention so described may include a particular feature, structure, orcharacteristic, but not every embodiment necessarily includes theparticular feature, structure, or characteristic. Further, repeated useof the phrase “in one embodiment,” or “in an exemplary embodiment,” donot necessarily refer to the same embodiment, although they may.

In the following description and claims, the terms “coupled” and“connected,” along with their derivatives, may be used. It should beunderstood that these terms may be not intended as synonyms for eachother. Rather, in particular embodiments, “connected” may be used toindicate that two or more elements are in direct physical or electricalcontact with each other. “Coupled” may mean that two or more elementsare in direct physical or electrical contact. However, “coupled” mayalso mean that two or more elements are not in direct contact with eachother, but yet still co-operate or interact with each other.

An algorithm may be here, and generally, considered to be aself-consistent sequence of acts or operations leading to a desiredresult. These include physical manipulations of physical quantities.Usually, though not necessarily, these quantities take the form ofelectrical or magnetic signals capable of being stored, transferred,combined, compared, and otherwise manipulated. It has proven convenientat times, principally for reasons of common usage, to refer to thesesignals as bits, values, elements, symbols, characters, terms, numbersor the like. It should be understood, however, that all of these andsimilar terms are to be associated with the appropriate physicalquantities and are merely convenient labels applied to these quantities.

Unless specifically stated otherwise, as apparent from the followingdiscussions, it may be appreciated that throughout the specificationdiscussions utilizing terms such as “processing,” “computing,”“calculating,” “determining,” or the like, refer to the action and/orprocesses of a computer or computing system, or similar electroniccomputing device, that manipulate and/or transform data represented asphysical, such as electronic, quantities within the computing system'sregisters and/or memories into other data similarly represented asphysical quantities within the computing system's memories, registers orother such information storage, transmission or display devices.

In a similar manner, the term “processor” may refer to any device orportion of a device that processes electronic data from registers and/ormemory to transform that electronic data into other electronic data thatmay be stored in registers and/or memory. A “computing platform” maycomprise one or more processors.

Embodiments of the present invention may include apparatuses forperforming the operations herein. An apparatus may be speciallyconstructed for the desired purposes, or it may comprise a generalpurpose device selectively activated or reconfigured by a program storedin the device.

In yet another exemplary embodiment, the invention may be implementedusing a combination of any of, e.g., but not limited to, hardware,firmware and software, etc.

In one or more embodiments, the present embodiments are embodied inmachine-executable instructions. The instructions can be used to cause aprocessing device, for example a general-purpose or special-purposeprocessor, which is programmed with the instructions, to perform thesteps of the present invention. Alternatively, the steps of the presentinvention can be performed by specific hardware components that containhardwired logic for performing the steps, or by any combination ofprogrammed computer components and custom hardware components. Forexample, the present invention can be provided as a computer programproduct, as outlined above. In this environment, the embodiments caninclude a machine-readable medium having instructions stored on it. Theinstructions can be used to program any processor or processors (orother electronic devices) to perform a process or method according tothe present exemplary embodiments. In addition, the present inventioncan also be downloaded and stored on a computer program product. Here,the program can be transferred from a remote computer (e.g., a server)to a requesting computer (e.g., a client) by way of data signalsembodied in a carrier wave or other propagation medium via acommunication link (e.g., a modem or network connection) and ultimatelysuch signals may be stored on the computer systems for subsequentexecution).

Exemplary Communications Embodiments

In one or more embodiments, the present embodiments are practiced in theenvironment of a computer network or networks. The network can include aprivate network, or a public network (for example the Internet, asdescribed below), or a combination of both. The network includeshardware, software, or a combination of both.

From a telecommunications-oriented view, the network can be described asa set of hardware nodes interconnected by a communications facility,with one or more processes (hardware, software, or a combinationthereof) functioning at each such node. The processes caninter-communicate and exchange information with one another viacommunication pathways between them called interprocess communicationpathways.

On these pathways, appropriate communications protocols are used. Thedistinction between hardware and software may not be easily defined,with the same or similar functions capable of being preformed with useof either, or alternatives.

An exemplary computer and/or telecommunications network environment inaccordance with the present embodiments may include node, which includemay hardware, software, or a combination of hardware and software. Thenodes may be interconnected via a communications network. Each node mayinclude one or more processes, executable by processors incorporatedinto the nodes. A single process may be run by multiple processors, ormultiple processes may be run by a single processor, for example.Additionally, each of the nodes may provide an interface point betweennetwork and the outside world, and may incorporate a collection ofsub-networks.

As used herein, “software” processes may include, for example, softwareand/or hardware entities that perform work over time, such as tasks,threads, and intelligent agents. Also, each process may refer tomultiple processes, for carrying out instructions in sequence or inparallel, continuously or intermittently.

In an exemplary embodiment, the processes may communicate with oneanother through interprocess communication pathways (not labeled)supporting communication through any communications protocol. Thepathways may function in sequence or in parallel, continuously orintermittently. The pathways can use any of the communicationsstandards, protocols or technologies, described herein with respect to acommunications network, in addition to standard parallel instructionsets used by many computers.

The nodes may include any entities capable of performing processingfunctions. Examples of such nodes that can be used with the embodimentsinclude computers (such as personal computers, workstations, servers, ormainframes), handheld wireless devices and wireline devices (such aspersonal digital assistants (PDAs), modem cell phones with processingcapability, wireless e-mail devices including BLACKBERRY™ devices),document processing devices (such as scanners, printers, facsimilemachines, or multifunction document machines), or complex entities (suchas local-area networks or wide area networks) to which are connected acollection of processors, as described. For example, in the context ofthe present invention, a node itself can be a wide-area network (WAN), alocal-area network (LAN), a private network (such as a Virtual PrivateNetwork (VPN)), or collection of networks.

Communications between the nodes may be made possible by acommunications network. A node may be connected either continuously orintermittently with communications network. As an example, in thecontext of the present invention, a communications network can be adigital communications infrastructure providing adequate bandwidth andinformation security.

The communications network can include wireline communicationscapability, wireless communications capability, or a combination ofboth, at any frequencies, using any type of standard, protocol ortechnology. In addition, in the present embodiments, the communicationsnetwork can be a private network (for example, a VPN) or a publicnetwork (for example, the Internet).

A non-inclusive list of exemplary wireless protocols and technologiesused by a communications network may include BlueTooth™, general packetradio service (GPRS), cellular digital packet data (CDPD), mobilesolutions platform (MSP), multimedia messaging (MMS), wirelessapplication protocol (WAP), code division multiple access (CDMA), shortmessage service (SMS), wireless markup language (WML), handheld devicemarkup language (HDML), binary runtime environment for wireless (BREW),radio access network (RAN), and packet switched core networks (PS-CN).Also included are various generation wireless technologies. An exemplarynon-inclusive list of primarily wireline protocols and technologies usedby a communications network includes asynchronous transfer mode (ATM),enhanced interior gateway routing protocol (EIGRP), frame relay (FR),high-level data link control (HDLC), Internet control message protocol(ICMP), interior gateway routing protocol (IGRP), internetwork packetexchange (IPX), ISDN, point-to-point protocol (PPP), transmissioncontrol protocol/internet protocol (TCP/IP), routing informationprotocol (RIP) and user datagram protocol (UDP). As skilled persons willrecognize, any other known or anticipated wireless or wireline protocolsand technologies can be used.

The embodiments may be employed across different generations of wirelessdevices. This includes 1 G-4G, nG, etc., according to present paradigms.1 G refers to the first generation wide area wireless (WWAN)communications systems, dated in the 1970s and 1980s. These devices areanalog, designed for voice transfer and circuit-switched, and includeAMPS, NMT and TACS. 2G refers to second generation communications, datedin the 1990s, characterized as digital, capable of voice and datatransfer, and include HSCSD, GSM, CDMA IS-95-A and D-AMPS (TDMA/IS-136).2.5G refers to the generation of communications between 2G and 3G. 3Grefers to third generation communications systems recently coming intoexistence, characterized, for example, by data rates of 144 Kbps to over2 Mbps (high speed), being packet-switched, and permitting multimediacontent, including GPRS, 1xRTT, EDGE, HDR, W-CDMA. 4G refers to fourthgeneration and provides an end-to-end IP solution where voice, data andstreamed multimedia can be served to users on an “anytime, anywhere”basis at higher data rates than previous generations, and will likelyinclude a fully IP-based and integration of systems and network ofnetworks achieved after convergence of wired and wireless networks,including computer, consumer electronics and communications, forproviding 100 Mbit/s and 1 Gbit/s communications, with end-to-endquality of service and high security, including providing servicesanytime, anywhere, at affordable cost and one billing. 5G refers tofifth generation and provides a complete version to enable the trueWorld Wide Wireless Web (WWWW), i.e., either Semantic Web or Web 3.0,for example. Advanced technologies may include intelligent antenna,radio frequency agileness and flexible modulation are required tooptimize ad-hoc wireless networks.

As noted, each node includes one or more processes executable byprocessors 404 incorporated into the nodes. In a number of embodiments,the set of processes, separately or individually, can represent entitiesin the real world, defined by the purpose for which the invention isused.

Furthermore, the processes and processors need not be located at thesame physical locations. In other words, each processor can be executedat one or more geographically distant processor, over for example, a LANor WAN connection. A great range of possibilities for practicing theembodiments may be employed, using different networking hardware andsoftware configurations from the ones above mentioned.

While various embodiments of the present invention have been describedabove, it should be understood that they have been presented by way ofexample only, and not limitation. Thus, the breadth and scope of thepresent invention should not be limited by any of the above-describedexemplary embodiments, but should instead be defined only in accordancewith the following claims and their equivalents. Finally, it will beappreciated by those skilled in the art that changes could be made tothe embodiments described above without departing from the broadinventive concept thereof. It is understood, therefore, that thisinvention is not limited to the particular embodiments disclosed, but isintended to cover modifications within the spirit and scope of thepresent invention as defined in the appended claims.

1. A computer-implemented method for administering a special purposetrust which includes one or more municipal bonds and administeringpayments of obligations of a plurality of securities issued by thespecial purpose trust, comprising: administering, via a computerprocessor, a portfolio of securities, the portfolio comprising a FirstSecurity, a Second Security, and one or more municipal bonds, the FirstSecurity having been issued by the special purpose trust, wherein theFirst Security being funded at least in part by equity from a municipalarbitrage portfolio (MAP) Fund, the MAP fund being an entity subject tosecurities regulation oversight, the assets of the MAP Fund beingmanaged by at least one fund manager, and the First Security provides afirst series of payments to the MAP Fund, the Second Security havingbeen issued by the special purpose trust, the Second Security results ina second series of payments to an investor or investors, and the one ormore municipal bonds, being purchased, owned, and held by the specialpurpose trust, the one or more municipal bonds, generate incomecomprising at least one of interest or principal, the one or moremunicipal bonds having been purchased on instructions from the at leastone fund manager or the MAP Fund, and having been purchased by using oneor more step out transactions, and wherein at least one broker or thespecial purpose trust act only as principals for the benefit of thespecial purpose trust and not as agents for the MAP Fund, the MAP Fundbeing obligated to reimburse losses incurred by a third party liquidityprovider (LP) as a result of performing the LP's obligation to purchasethe Second Security upon tender by a holder, the MAP Fund is bound by atleast one security agreement which comprises at least one of: areimbursement agreement between the LP and the MAP Fund, wherein thereimbursement agreement may include provisions that permit the LP tocause a sale of at least one of the municipal bonds, or a Second Trustwhich holds the First Security and other investment securities ifshortfall criteria specified in the reimbursement agreement are not metfor satisfaction of obligations, a shortfall swap agreement between theLP and the MAP Fund (or the Second Trust), wherein if the LP cannotrecover losses of the LP from a sale of the municipal bonds underlyingthe special purpose trust that issued the First Security and the SecondSecurity, the shortfall swap agreement requires the MAP Fund (or theSecond Trust) to pay an amount to the LP equal to a shortfall, at leastone tri-party agreement between the LP, the MAP Fund (or the SecondTrust), and a financial intermediary approved by the LP and the MAPFund, where the tri-party agreement includes provisions that permit thefinancial intermediary (or a custodian) to fulfill a role as trustee toenforce provisions of a reimbursement agreement or a shortfall swapagreement, for the benefit of the LP, or a non-recourse obligation ofthe MAP Fund, said administering of the portfolio of securitiescomprising: (a) collecting data, via said computer processor, about theportfolio of securities-; (b) receiving pricing information, via saidcomputer processor, about the portfolio of securities from at least oneof a prime broker, a trustee, or a third party pricing service; (c)generating a valuation, via said computer processor, of the portfolio ofsecurities based on the collected data and the received pricinginformation; (d) determining a distribution of payments from the specialpurpose trust, via said computer processor, said distribution ofpayments comprising the first series of payments and the second seriesof payments, wherein the first series of payments and the second seriesof payments comprise said income from at least one of the interest orthe principal from the one or more municipal bonds, said distribution ofpayments to the holders of the First Securities and the SecondSecurities based on the valuation, the collected data, and the receivedpricing information; and (e) reporting, via said computer processor, thevaluation of the portfolio of securities.
 2. The computer-implementedmethod of claim 1, wherein the MAP Fund hedges interest rate exposure,or risks inherent in the First Security and reimbursement obligations,using at least one of: exchange traded futures exchange traded options,U.S. Treasury obligations, swap agreements, or other derivatives.
 3. Thecomputer-implemented method of claim 1, wherein the First Security is aResidual Trust Certificate (RTC).
 4. The computer-implemented method ofclaim 1, wherein the Second Security is a Floating Rate or Fixed RateTrust Certificate.
 5. The computer-implemented method of claim 1,wherein the Second Security may have a payment priority over the FirstSecurity with respect to the distribution of payments.
 6. Thecomputer-implemented method according to claim 1, wherein the pricinginformation received includes valuation data of the portfolio whereinthe valuation of the portfolio is calculated using a method comprising:i) calculating or receiving an amortization and the income on the one ormore municipal bonds beginning with a bond price; ii) determining,calculating, or receiving said interest income earned from the one ormore municipal bonds; iii) allocating a portion of said interest incomeand any gain share to the Second Security in accordance with obligationsbetween said special purpose trust and the Second Security; iv)allocating a second portion of said interest income to pay fees andexpenses of said special purpose trust; and v) allocating any remainingof said income after said allocating of said (iii) and said (iv) and anygain and any loss of said value of each of the one or more municipalbonds, to the First Securities.
 7. The computer-implemented method ofclaim 6, wherein said allocating of said (iii) comprises for the one ormore municipal bonds, paying interest and principal on at least one of aperiodic, aperiodic basis, accruing, or amortizing on a daily basis. 8.The computer-implemented method according to claim 1, further comprisingat least one of: electronically collecting, daily, portfolio dataregarding the one or more municipal bonds from at least one primebroker, trustee, or third party service; electronically collectingmarket prices data from at least one third party pricing service forindependent pricing confirmation; or transmitting electronically themarket prices and portfolio data to a portfolio data collection module.9. The computer-implemented method according to claim 8, furthercomprising at least one of: processing said data collected from said atleast one prime broker, the trustee, or said at least one third partypricing service; transferring said processed data into an administrationdatabase where said processed data is at least one of: compiled, orelectronically reconfigured to provide data needed to determinedistributions to at least one of: the First Securities, the SecondSecurities, or paying fees and expenses of the special purpose trust.10. The computer-implemented method according to claim 9, furthercomprising: computing using a portfolio valuation and report modulecomprising at least one of: receiving values of the First Securities andother related securities based upon established pricing methodologies,on at least one of a daily basis, a periodic basis, or an aperiodicbasis; or generating reports for at least one of: daily valuation,accounting, journal entry, or trustee reconciliation.
 11. Thecomputer-implemented method of claim 1 further comprising at least oneof: providing periodic portfolio monitoring and analysis; providingaperiodic portfolio monitoring and analysis; providing daily portfoliomonitoring and analysis; providing integration of multiple data sourcesinto a customized single report; interfacing with multiple primebrokers; monitoring compliance; reporting compliance; providingcompliance oversight; calculating net asset value (NAV); computing NAV;calculating daily NAV; computing daily NAV; calculating distributions;computing distributions; calculating daily distributions; computingdaily distributions; providing performance reporting details; orproviding margin to equity reporting.
 12. The method of claim 1, whereinthe method is computer-implemented, and wherein the method furthercomprises: providing reports to the MAP Fund; establishing the specialpurpose trust comprising: issuing the First Security funded at least inpart by equity of the MAP Fund, the First Security providing a series ofresidual interest payments to the MAP Fund; issuing the Second Securitythat results in a series of distributions to a second investor orinvestors; and administering the one or more municipal bonds owned bythe special purpose trust; and wherein the MAP Fund has an obligation toreimburse a third party liquidity provider (LP) for losses incurred bythe third party LP incurred by performing the LP's obligation topurchase the Second Security upon tender by a holder, wherein saidobligation to reimburse said losses is imposed based on values collectedby a portfolio data collection software executed by the computerprocessor and valued by a portfolio valuation software executed by thecomputer processor.
 13. The computer-implemented method of claim 1,wherein said receiving of said (b) comprises at least one of receivingvalues calculated at least one of periodically, daily, or based on aclose of market security value.
 14. The computer-implemented method ofclaim 1, wherein said reporting of said (e) comprises at least one ofoutputting by said computer, or storing in storage of said computer. 15.The method of claim 1, wherein the assets of the MAP fund have beenprovided by at least one of a MAP Fund investor or MAP Fund investors.16. The method of claim 1, wherein the series of payments are providedfrom the special purpose trust to at least one of a tax exempt moneymarket fund (MMF) or a MAP Fund for the benefit of at least one of a MMFinvestor, a MMF investors, a MAP Fund investor, or a MAP Fund investors.17. A computer-implemented system for administering a special purposetrust which includes one or more municipal bonds and administeringpayments of obligations of a plurality of securities issued by thespecial purpose trust, comprising: means for administering, via acomputer processor, a portfolio of securities, the portfolio comprisinga First Security, a Second Security, and one or more municipal bonds,the First Security having been issued by the special purpose trust,wherein the First Security being funded at least in part by equity froma municipal arbitrage portfolio (MAP) Fund, the MAP fund being an entitysubject to securities regulation oversight, the assets of the MAP Fundbeing managed by at least one fund manager, and the First Securityprovides a series of payments to the MAP Fund, the Second Securityhaving been issued by the special purpose trust, the Second Securityresults in a series of payments to an investor or investors, and the oneor more municipal bonds, being purchased, owned, and held by the specialpurpose trust, the one or more municipal bonds, generate incomecomprising at least one of interest or principal, the one or moremunicipal bonds having been purchased on instructions from the at leastone fund manager or the MAP Fund, and having been purchased by using oneor more step out transactions, and wherein at least one broker or thespecial purpose trust act only as principals for the benefit of thespecial purpose trust and not as agents for the MAP Fund, the MAP Fundis obligated to reimburse losses incurred by a third party liquidityprovider (LP) as a result of performing the LP's obligation to purchasethe Second Security upon tender by a holder, the MAP Fund is bound by atleast one security agreement which comprises at least one of: areimbursement agreement between a LP and the MAP Fund, wherein thereimbursement agreement may include provisions that permit the LP tocause a sale of at least one of the municipal bonds or a Second Trustwhich holds the First Security and other investment securities ifshortfall criteria specified in the reimbursement agreement are not metfor satisfaction of obligations, a shortfall swap agreement between theLP and the MAP Fund (or the Second Trust), wherein if the LP cannotrecover losses of the LP from a sale of the municipal bonds underlyingthe special purpose trust that issued the First Security and the SecondSecurity, the shortfall swap agreement requires the MAP Fund (or theSecond Trust) to pay an amount to the LP equal to such shortfall, atleast one tri-party agreement between the LP, the MAP Fund (or theSecond Trust), and a financial intermediary approved by the LP and theMAP Fund, where the tri-party agreement includes provisions that permitthe financial intermediary (or a custodian) to fulfill a role as trusteeto enforce provisions of a reimbursement agreement or a shortfall swapagreement, for the benefit of the LP, or a non-recourse obligation ofthe MAP Fund, said means for administering of the portfolio ofsecurities comprising: collection means for collecting data, via saidcomputer processor, about the portfolio of securities; pricing means forreceiving pricing information, via said computer processor, about theportfolio of securities from at least one of a prime broker, a trustee,or a third party pricing service; valuation means for generating avaluation, via said computer processor, of the portfolio of securitiesbased on the collected data and the received pricing information;distribution means for determining a distribution of payments from thespecial purpose trust, via said computer processor, said distribution ofpayments comprising the first series of payments and the second seriesof payments, wherein the first series of payments and the second seriesof payments comprise said income from at least one of the interest orthe principal from the one or more municipal bonds, said distribution ofpayments to the holders of the First Securities and the SecondSecurities based on the valuation, the collected data, and the receivedpricing information, said distribution means responsive to saidcollection means, said pricing means, and said valuation means; andreporting means for reporting, via said computer, the valuation of theportfolio of securities, said reporting means responsive to saiddistribution means.
 18. The computer-implemented system of claim 17,wherein said valuation means comprises: a processor adapted toadminister a plurality of assets comprising said securities, and adaptedto manage portfolio data collection, receipt of portfolio valuationinformation, and reporting.
 19. A computer program product embodied on acomputer accessible medium comprising program logic which when executedon a processor enables the processor to perform a method foradministering a special purpose trust which includes one or moremunicipal bonds and administering payments of obligations of a pluralityof securities issued by the special purpose trust, the methodcomprising: administering, via a computer processor, a portfolio ofsecurities, the portfolio comprising a First Security, a SecondSecurity, and one or more municipal bonds, the First Security havingbeen issued by the special purpose trust, wherein the First Securitybeing funded at least in part from equity by a municipal arbitrageportfolio (MAP) Fund, the MAP fund being an entity subject to securitiesregulation oversight, the assets of the MAP Fund being managed by atleast one fund manager, and the First Security provides a series ofpayments to the MAP Fund, the Second Security having been issued by thespecial purpose trust, the Second Security results in a series ofpayments to an investor or investors, and the one or more municipalbonds, being purchased, owned, and held by the special purpose trust,the one or more municipal bonds, generate income comprising at least oneof interest or principal, the one or more municipal bonds having beenpurchased on instructions from the at least one fund manager or the MAPFund, and having been purchased by using one or more step outtransactions, and wherein at least one broker or the special purposetrust act only as principals for the benefit of the special purposetrust and not as agents for the MAP Fund, the MAP Fund being obligatedto reimburse losses incurred by a third party liquidity provider (LP) asa result of performing the LP's obligation to purchase the SecondSecurity upon tender by a holder, the MAP Fund is bound by at least onesecurity agreement which comprises at least one of: a reimbursementagreement between a LP and the MAP Fund, wherein the reimbursementagreement may include provisions that permit the LP to cause a sale ofat least one of the municipal bonds, or a Second Trust which holds theFirst Security and other investment securities if shortfall criteriaspecified in the reimbursement agreement are not met for satisfaction ofobligations, a shortfall swap agreement between the LP and the MAP Fund(or the Second Trust), wherein if the LP cannot recover losses of the LPfrom a sale of the municipal bonds underlying the special purpose trustthat issued the First Security and the Second Security, the shortfallswap agreement requires the MAP Fund (or the Second Trust) to pay anamount to the LP equal to a shortfall; at least one tri-party agreementbetween the LP, the MAP Fund (or the Second Trust), and a financialintermediary approved by the LP and the MAP Fund, where the tri-partyagreement includes provisions that permit the financial intermediary (ora custodian) to fulfill a role as trustee to enforce provisions of areimbursement agreement or a shortfall swap agreement, for the benefitof the LP, or a non-recourse obligation of the MAP Fund, saidadministering of the portfolio of securities comprising: (a) collectingdata, via said computer processor, about the portfolio of securities;(b) receiving pricing information, via said computer processor, aboutthe portfolio of securities from at least one of a prime broker, atrustee, or a third party pricing service; (c) generating a valuation,via said computer processor, of the portfolio of securities based on thecollected data and the received pricing information; (d) determining adistribution of payments from the special purpose trust, via saidcomputer processor, said distribution of payments comprising the firstseries of payments and the second series of payments, wherein the firstseries of payments and the second series of payments comprise saidincome from at least one of the interest or the principal from the oneor more municipal bonds, said distribution of payments to the holders ofthe First Securities and the Second Securities based on the valuation,the collected data, and the received pricing information; and (e)reporting, via said computer processor, the valuation of the portfolioof securities.